DCIT CIR 3(3), MUMBAI v. TEMAASEK HOLDINGS ADVISORS INDIA P. LTD, MUMBAI

ITA 5616/MUM/2009 | 2005-2006
Pronouncement Date: 30-10-2013 | Result: Partly Allowed

Appeal Details

RSA Number 561619914 RSA 2009
Assessee PAN AACCM4000H
Bench Mumbai
Appeal Number ITA 5616/MUM/2009
Duration Of Justice 4 year(s) 15 day(s)
Appellant DCIT CIR 3(3), MUMBAI
Respondent TEMAASEK HOLDINGS ADVISORS INDIA P. LTD, MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 30-10-2013
Appeal Filed By Department
Order Result Partly Allowed
Bench Allotted K
Tribunal Order Date 30-10-2013
Date Of Final Hearing 08-10-2013
Next Hearing Date 08-10-2013
Assessment Year 2005-2006
Appeal Filed On 15-10-2009
Judgment Text
K IN THE INCOME TAX APPELLATE TRIBUNAL K BENCH MUMBAI . . . BEFORE SHRI B.R. MITTAL JM AND SHRI D. KARUNAKARA RAO AM ./ I.T.A. NO. 5395/M/2009 (AY: 2005 - 2006) TEMASEK HOLDINGS ADVISORS INDIA P. LTD. 12 TH FLOOR EXPRESS TOWERS NARIMAN POINT MUMBAI 400 021. / VS. DCIT CIRCLE 3(3) R.NO. 668 6 TH FLOOR AAYAKAR BHAVAN M.K. ROAD MUMBAI - 20. ./ PAN : AACCM 4000 H ( / APPELLANT) .. ( / RESPONDENT ) ./ I.T.A. NO. 5616/M/2009 (AY: 2005 - 2006) DCIT CIRCLE 3(3) R.NO. 668 6 TH FLOOR AAYAKAR BHAVAN M.K. ROAD MUMBAI - 20. / VS. TEMASEK HOLDINGS ADVISORS INDIA P. LTD. 12 TH FLOOR EXPRESS TOWERS NARIMAN POINT MUMBAI 400 021. ./ PAN : AACCM 4000 H ( / APPELLANT) .. ( / RESPONDENT ) / ASSESSEE BY : SHRI PORUS KAKA / REVENUE BY : SHRI AJEET KUMAR JAIN / DATE OF HEARING : 8.10.2013 / DATE OF PRONOUNCEMENT : 30. 10.2013 / O R D E R PER D. KARUNAKARA RAO AM: THERE ARE TWO APPEALS UNDER CONSIDERATION AND THEY ARE CROSS APPEALS. BOTH THESE APPEALS ARE FILED AGAINST THE ORDER OF CIT (A) - XXXII MUMBAI DATED 20.7.2009 FOR THE AY 2005 - 2006. CONSIDERING THE FACT THESE ARE CROSS APPEA LS FOR THE SAKE OF CONVENIENC E AND AS PER THE JUDICIAL RULINGS THEY ARE CLUBBED HEARD COMBINEDLY AND DISPOSED OF IN THIS CONSOLIDATED ORDER. APPEAL WISE AND GROUND WISE ADJUDICATION IS GIVEN IN THE SUCCEEDING PARAGRAPHS. 2. FIRSTLY WE SHALL TAKE UP ITA NO.5395/M/2009 (AY: 2005 - 20 06) WHICH IS FILED BY THE ASSESSEE ON 25.9.2009 AND THE GROUNDS RAISED IN THIS APPEAL READ AS UNDER: 2 1. THE CIT (A) ERRED IN NOT ADJUDICATING THE FOLLOWING SPECIFIC GROUNDS HOLDING THEM AS IN FRUCTUOUS AND REDUNDANT: 1.1. THAT THE LEARNED AO IS NOT BOUND BY T HE ORDER OF THE JCIT (TRANSFER PRICING) - 11(5) AS SECTION 92CA(4) OF THE ACT AS APPLICABLE FOR THE RELEVANT ASSESSMENT YEAR REQUIRED THE AO TO COMPUTE THE TOTAL INCOME HAVING REGARD TO THE ARMS LENGTH PRICE (ALP) DETERMINED BY THE LD TRANSFER PRICING O FFICER (TPO). 1.2. THAT THE REJECTION BY THE LD TPO OF THE TRANSFER PRICING ANALYSIS UNDERTAKEN BY THE APPELLANT WITHOUT EXPRESSLY MENTIONING THE SPECIFIC CLAUSE WHICH HAS BEEN INVOKED UNDER SECTION 92C(3) OF THE ACT SO AS TO WARRANT REJECTION OF THE APPELLANT S COMPARABLES AND SUBSTITUTE THE SAME WITH THE DIFFERENT SET OF COMPARABLES VITIATED HIS ORDER AND CONSEQUENTLY THE ASSESSMENT MADE. 1.3. THAT THE FAILURE BY THE LD TPO TO SHARE THE FRESH COMPARABILITY ANALYSIS CONDUCTED AT THE TIME OF ASSESSMENT VITIATED THE ASSESSMENT MADE. 1.4. THAT THE LD TPO ERRED IN NOT MAKING SUITABLE ADJUSTMENTS TO THE NET PROFIT MARGINS OF THE APPELLANT VIS - - VIS THE COMPARABLE COMPANIES FOR DIFFERENCE IN RISK PROFILE IN TERMS OF RULE - 10B OF THE I T RULES 1962. 1.5. THAT THE AO ERRED IN CALCULATING THE TRANSFER PRICING ADJUSTMENT WITHOUT CONSIDERING THE PERMITTED + / - 5% VARIATION FROM THE ARMS LENGTH PRICE ADS PER PROVISO TO SECTION 92C(2) OF THE ACT. 2. THE CIT (A) ERRED IN REJECTING THE CONTENTION OF THE APPELLANT THAT A FRESH COMPARABIL ITY ANALYSIS SHOULD NOT BE CONDUCTED AT THE TIME OF ASSESSMENT USING DATA WHICH IS NOT CONTEMPORANEOUS AS PER RULE 10D(4) OF THE RULES. 3. IN NOT ACCEPTING THE APPELLANTS CONTENTION FOR USE OF MULTIPLE YEAR DATA FOR CALCULATING THE OPERATING MARGIN FOR COMP ANIES RENDERING COMPARABLE SERVICES I.E. DATA FOR FINANCIAL YEAR 2002 - 2003 2003 - 2004 AND 2004 - 2005. 4. IN REJECTING THE COMPANIES ( LAZARD INDIA LIMITED BAJAJ CAPITAL LTD AND FMEC INTERNATIONAL FINANCIAL SERVICES LIMITED) IDENTIFIED BY THE APPELLANT AS COMP ARABLE TO THE TRANSACTION OF RENDERING INVESTMENT ADVISORY SERVICES ON THE BASIS OF IT BEING A PERSISTENT LOSS MAKING COMPANY. 5. IN ACCEPTING TWO ADDITIONAL COMPANIES I.E. ICDS SECURITIES LTD AND SUMEDHA FISCAL SERVICES LTD SELECTED BY THE LD TPO AS COMPARABLE TO THE ACTIVITY OF INVESTMENT ADVISORY SERVICES PROVIDED BY THE APPELLANT ON THE GROUND THAT SEGMENTAL DATA HAS BEEN USED FOR COMPARISON PURPOSES THEREBY MAKING IT SIMILAR TO THE ACTIVITY OF THE APPELLANT WHEREAS THE FACT REMAINS THAT THE SAID COMPANIES ARE NOT COMPARABLE TO THE APPELLANT ON ACCOUNT OF DIFFERENCE IN FUNCTIONS / ACTIVITY. ACCORDINGLY THE FINDING OF THE LD CIT (A) IS ERRONEOUS AND PERVERSE. 6. IN NOT DELETING THE ENTIRE ADDITION OF RS. 26 701 710/ - MADE TO THE TOTAL INCOME BY THE AO. 3. SHRI PORUS KAKA LD COUNSEL APPEARED FOR THE ASSESSEE AT THE V ERY BEGINNING OF THE HEARING MENTIONED THAT THE ISSUES RAISED IN GROUND NOS. 1.1 1.2 AND 1.3 ARE ACADEMIC IN NATURE. ACCORDINGLY CONSIDERING THE ACADEMIC NATURE OF THE GROUNDS THE SAID GROUNDS COULD BE DISMISSED AS ACADEMIC . WE ORDER ACCORDINGLY. REFERRING TO ISSUES RAISED IN GROUND S NO. 2 AND 4 LD COUNSEL MENTIONED THAT THEY 3 ARE NOT PRE SSED. ACCORDINGLY GROUNDS NO. 2 AND 4 ARE DISMISSED AS NOT PRESSED . FURTHER REFERRING TO THE ISSUE RAISED IN GROUND NO.3 LD COUNSEL FAIRLY SUBMITTED THAT THE ISSUE INVOLVED I.E. REJECTING THE ASSESSEES CONTENTION OF USE OF THE MULTIPLE YEAR DATA FOR CALCUL ATING THE OPERATING MARGIN FOR COMPANIES RENDERING COMPARABLE SERVICES IS DECIDED AGAINST THE ASSESSEE THEREFORE THE SAME HAS TO BE DISMISSED . PER CONT R A ON THIS ISSUE LD DR MENTIONED THAT THE LD COUNSEL IS FAIR IN MENTIONING THE SAME AND STATED THAT THERE ARE PLETHORA OF JUDGMENTS IN FAVOUR OF REVENUE THEREFORE THE GROUND IS REQUIRED TO BE DISMISSED. ON HEARING BOTH THE PARTIES GROUND NO.3 STANDS DISMISSED TOO . FURTHER REFERRING TO GROUND NO.1.5 LD COUNSEL MENTIONED THAT THE ADJUDICATION OF THE SAID GROUND DEPENDS ON THE OUTCOME OF GROUND S NO. 1.4 AND 5 . LASTLY LD COUNSEL MENTIONED THAT THE GROUND NO.6 IS GENERAL IN NATURE AND THE SAME DOES NOT CALL FOR ANY SPECIFIC ADJUDICATION. RESULTANTLY THE GROUNDS LEFT FOR ADJUDICATION IN THIS ORDER AR E ONLY GROUND NO. 1.4 1.5 AND GROUND NO.5 . THUS THE ISSUE INVOLVED IN THE GROUND 1.4 RELATES TO FAILURE OF THE TPO IN NOT MAKING ADJUSTMENTS TO NET PROFIT MARGINS OF THE ASSESSEE FOR DIFFERENCE IN RISK PROFILE IN TERMS OF RULE - 10B OF THE INCOME TAX RULES 1962. GROUND NO.1.5 RELATES TO THE APPLICABILITY OF THE PROVISO TO SECTION 92C(2) OF THE ACT AND IT IS CONSEQUENTIAL TO THE OUTCOME OF THE ADJUDICATION OF GROUND NO.1.4 AND 5. FURTHER THE ISSUE RAIS ED IN GROUND NO.5 RELATES TO THE ACCEPTING THE TWO ADDITIONAL COMPARABLES SUCH AS SUMETHA FISCAL SERVICES LTD AND ICDS SECURITIES LTD WHEN THESE COMPARABLES ARE FUNCTIONALLY INCOMPARABLE (IE FAR). 4. BRIEFLY STATED THE SUCCINCT FACTS ARE THAT THE ASSESSE E M/S TEMASEK HOLDINGS ADVISORS INDIA PVT. LTD ( THAIPL ) IS WHOLLY SUBSIDIARY OF M/S. TEMASEK HOLDING PVT. LTD ( THPL ) SINGAPORE AND IT IS AN INVESTMENT FIRM. DURING THE YEAR ASSESSEE RENDERED INVESTMENT ADVISORY SERVICES (IN SHORT IAS) TO THPL AS PER THE ASSESSMENT DATED 1.4.2004 AND RECEIVED RS 10 01 20 558/ . THE IAS INCLUDES PROVIDING RESEARCH REPORTS ECONOMIC ANALYSIS IDENTIFYING SCREENING AND INVESTIGATING FOR INVESTMENT OPPORTUNITIES RECOGNIZING SOURCES FOR VALUE CREATION ADVISING ON PORTFOL IO SECURITIES/COMPANIES ANALYZING THE POLITICAL AND ECONOMIC SCENARIO FOR THE INVESTMENT PURPOSES IN INDIA ETC. THE DETAILS OF THE SERVICES ARE GIVEN IN PARA 1 RELATING TO SCOPE OF SERVICES OF THE AGREEMENT (PAGE 40 OF THE PAPER BOOK). FURTHER AFTER M ONITORING AND MAKING RECOMMENDATIONS TO THPL 4 PARTICULARLY IN MATTERS OF INVESTMENTS IN UNLISTED COMPANIES ASSESSEE RECEIVES MARKUP OF 21% BESIDES REIMBURSEMENTS OF CERTAIN EXPENSES ON ACTUAL BASIS. THEREFORE THE INTERNATIONAL TRANSACTIONS ENTERED INTO BY THE ASSESSEE WITH THE ASSOCIATED ENTERPRISES (AE) FOR THE PURPOSE OF TRANSFER PRICING ARE LISTED AS UNDER: S. NO. NAME OF THE AE NATURE O F TRANSACTION AMOUNT (RS.) METHOD USED 1 TEMASEK HOLDINGS (PTE) LTD. SINGAPORE INVESTMENT ADVISORY SERVICES 10 01 20 558/ - TNMM 2 TEMASEK HOLDINGS (PTE) LTD SINGAPORE REIMBURSEMENT OF SALARY & RELATED EXP. 4 30 36 099/ - -- 3 TEMASEK HOLDINGS (PTE) LTD. SINGAPORE RECOVERY OF EXPENSES 1 93 105/ - -- 5. IN ACCORDANCE WITH THE PROVISIONS OF SECTION 92CA(3) OF THE ACT AO MADE A REFERENCE TO THE TPO FOR COMPUTATION OF THE ALP IN RELATION TO THE INTERNATIONAL TRANSACTIONS. EVENTUALLY TPO MADE AN ORDER U/S 92CA(3) OF THE ACT DATED 29.8.2008 AND MADE ADJUSTMENTS ON ALP. THE RELEVANT ADJUSTMENTS READ AS UNDER: THE ASSESSEE HAS CALCULATED ITS NET PROFIT MARGIN TO COSTS AT 15% WHILE THE ARMS LENGTH MARGIN COMES TO 45.67%. I AM OF THE OPINION THAT THE PRICE CHARGED BY THE ASSESSEE FOR ADVISORY SERVICES HAS NOT BEEN DETERMINED IN ACCORDANCE WITH SUB - SECTIONS (1) AND (2) OF SECTION 92C OF THE INCOME - TAX ACT 1961. ALSO THE INFORMATION OR DATA USED IN COMPUTATION OF THE ARMS LENGTH PRICE IS NOT RELIABLE OR CORR ECT. ACCORDINGLY THE AMOUNT OF ADJUSTMENT TO THE INCOME OF THE ASSESSEE IS BEING DETERMINED AS UNDER : 5.1.11. THUS THE ASSESSEE HAS RECEIVED SERVICE FEES OF RS. 10 01 20.558/ - FROM ITS AE FOR ADVISORY SERVICES. THE ARMS LENGTH VALUE OF THESE SERVICES IS CALCULATED AT RS 12 68 22 275/ - . THUS AN ADJUSTMENT OF RS 2 67 01 717/ - IS BEING MADE TO THE INCOME OF THE ASSESSES 6. THE ORDER OF THE TPO PASSED U/S 92CA(3) WA S FORWARDED TO THE ASSESSEE CALLING FOR EXPLANATIONS IF ANY. THE ASSESSEE FILED A REPLY DATED 26.9.2008. 5 CONSIDERING THE PROVISIONS OF SECTION 92CA(4) AO IGNORED THE OBJECTIONS RAISED BY THE ASSESSEE AND INCORPORATED THE DECISION OF THE TPO. ACCORDINGL Y THE ADDITION MADE WORKS OUT TO RS . 2 67 01 717 / - . WE SHALL NOW DISCUSS THE DETAILS OF THE PROCEEDINGS BEFORE THE TPO IN THE SUCCEEDING PARAGRAPH. BEFORE THE TPO: 7. BEFORE THE TPO ASSESSEE SUBMITTED THAT AN AMOUNT OF RS. 10 01 20 558/ - WAS R ECEIVED BY THE ASSESSEE FROM TH PL FOR PROVIDING THE IAS. THE BILLS WERE RAISED AT COST PLUS 15% MARGIN TOWARDS SERVICES RENDERED BY THE ASSESSEE. WHILE BENCH MARKING THESE TRANSACTIONS FOR THE TP STUDIES ASSESSEE USED TNMM METHOD MOST APPROPRIATE METHOD WITH OPERA TING PROFITS TO TOTAL COSTS (OP/TC) AS PROFIT LEVEL INDICATOR (IN SHORT PLI). THE FOLLOWING 5 COMPARABLES WERE FINALLY SHORTLISTED BY THE ASSESSEE FOR TNMM STUDIES AND THE ARITHMETIC MEAN IS COMPUTED AT NEGATIVE FIGURE OF 1.46% . 8. OTHERWISE ASSESSEES ORIGINAL ARITHMETIC MEAN WAS 13.63% AND CONSIDERED 7 COMPARABLES. BEFORE TPO ASSESSEE EXPLAINED TWO COMPANIES (NAMELY BAJAJ CAPITAL LTD AND FMEC INTERNATIONAL FINANCIAL SERVICES LTD) AND SETTLED FOR 5 COMPANIES TABULATED ABOVE. THUS T HE ASSE SSEES MARGINS AT 15% OVER COST IS HIGHER QUA THE ARITHMETIC MEAN OF NEGATIVE FIGURE OF ( - ) 1.46%. THEREFORE THE ASSESSEE CONCLUDED THAT HIS INTERNATIONAL TRANSACTIONS ARE AT ARMS LENGTH. TPO ISSUED A SHOW CAUSE NOTICE VIDE THE LETTER DATED 21.7.2008 PRO POSING TO REJECT THE FOLLOWING TWO COMPARABLES NAMELY - 6 9. AS PER THE TPO THE PERSISTENT LOSS MAKING COMPANY SHOULD BE CONSIDERED AS GOOD COMPARABLE. FURTHER ASSESSEE WAS INFORMED FOR CONSIDERING THE FOLLOWING SIX OTHER COMPARABLES. THE DETAILS OF T HE COMPANIES FUNCTIONS TOTAL COSTS PBIT AND MARGIN. 10. IN REPLY ASSESSEE MENTIONED THAT THE COMPARABLE M/S. GEEFCEE FINANCE LIMITED IS NOT A PERSISTENTLY LOSS MAKING COMPANY AS IT REGISTERED PROFITS OF 0.26%. REGARDING LAZARD INDIA LTD LD COUNSEL MENTIONED THAT PERSISTENTLY LOSS MAKING IS NOT A DISQUALIFICATION FOR TAKING IT AS A COMPARABLE. IN CONNECTION WITH THE OTHER SIX COMPARABLES PROPOSED BY THE TPO THE ASSESSEE MENTIONED THAT THEY ARE NOT FUNCTIONALLY COMPARABLE TO THE ASSESSEES BU SINESS OF INVESTMENT ADVISORY SERVICES. THE TPO CONSIDERED THE SAID SUBMISSIONS OF THE ASSESSEE AND ANALYZED THE SCOPE OF THE SERVICES RENDERED TO I TS TH PL SINGAPORE. FURTHER TPO PERUSED THE TP STUDY REPORT PREPARED BY THE ASSESSEE AND ANALYZED THEM IN DEPTH VIDE PARA 5.1.8 OF THE ORDER U/S 92CA(3) OF THE ACT . E VENTUALLY HE SHORTLISTED NINE COMPARABLES WITH AVERAGE PROFIT MARGIN OVER COST OF 45.67% . DETAILS OF NINE COMPARABLES THEIR PROFIT PERCENTAGES AND THE OTHER DISCUSSIONS ARE NARRATED IN PARA 5.1 .9 TO 5.1.12 OF THE TPOS ORDER AND THEY ARE IMPORTED AS UNDER: 5.1.9. THUS THE LIST OF FINALLY SELECTED COMPARABLES IS AS UNDER: - 7 THE NINE COMPARABLES HAVE EARNED A MARGIN OVER COSTS OF 45.67%. 5.1.10. UNDER RULE 10B(4) OF THE INCOME TAX RULES 1962 THE DATA TO BE USED IN ANALYZING THE COMPARABILITY OF AN UNCONTROLLED TRANSACTIONS WITH AN INTERNATIONAL TRANSACTION SHALL BE DATA RELATING TO THE FINANCIAL YEAR IN WHICH THE INTERNATIONAL TRANSACTION HAS BEEN ENTERED INTO. THROUGHOUT OUR ANALYSIS A BOVE WE HAVE USED DATA RELATING TO THE FINANCIAL YEAR 2004 - 2005 AS REQUIRED UNDER THE IT RULES. 5.1.11. THE ASSESSEE HAS CALCULATED ITS NET PROFIT MARGIN TO COSTS AT 15% WHILE THE ARMS LENGTH MARGIN COMES TO 45.67%. I AM OF THE OPINION THAT THE PRICE CHA RGED BY THE ASSESSEE FOR ADVISORY SERVICES HAS NOT BEEN DETERMINED IN ACCORDANCE WITH SUB - SECTIONS (1) AND (2) OF SECTION 92C OF THE INCOME - TAX ACT 1961. ALSO THE INFORMATION OR DATA USED IN COMPUTATION OF THE ARMS LENGTH PRICE IS NOT RELIABLE OR CORRECT. ACCORDINGLY THE AMOUNT OF ADJUSTMENT TO THE INCOME OF THE ASSESSEE IS BEING DETERMINED AS UNDER: - THUS THE ASESSEE HAS RECEIVED SERVICE FEES OF 10 01 20 558/ - FROM ITS AE FOR ADVISORY SERVICES. THE ARMS LENGTH VALUE OF THESE SERVICES IS CALCULATED AT RS. 12 68 22 275/ - . THUS AN ADJUSTMENT OF RS. 2 67 01 717/ - IS BEING MADE TO THE INCOME OF THE ASSESSEE. 10.1. FROM THE ABOVE LIST OF 9 COMPARABLES CHOSEN BY THE TPO 3 COMPARABLES OFFERED BY THE ASSESSEE FOUND ACCEPTABLE BY THE TPO. THEY ARE (1) ALLIANZ SECURITIES LTD; (2) KEYNOTE CORPORATE SERVICES LTD AND (3) SREI CAPITAL MARKETS LTD. HOWEVER THE ASSESSEE IS AGAINST THE INCLUSION OF OTHER 6 COMPARABLES AND THE ADDITION OF RS. 2 67 01 717/ - . AGGRIEVED WITH THE ABOVE ADJUSTMENTS/ADDITIO NS 8 ASSESSEE FILED AN APPEAL BEFORE THE CIT (A) AND RAISED LEGAL AS WELL AS FACTUAL ISSUES IN THE GROUNDS . BEFORE THE CIT(A): 11. DURING THE PROCEEDINGS BEFORE CIT(A) THE FIRST APPELLATE AUTHORITY ESSENTIALLY THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE AO AND THE TPO. ON CONSIDERING THE ASSESSEES SUBMISSIONS CIT (A) OBSERVED THAT THE FOLLOWING THREE COMPARABLES NAMELY ALLIANZ SECURITIES LTD KEYNOTE CORPORATE SERVICES LTD AND SREI CAPITAL MARKETS LTD WITH PROFITS MARGINS OF 24.95% 33.82% AN D 18.09% RESPECTIVELY ARE UNDISPUTED . HOWEVER IN CONNECTION WITH THE EXCLUSION OF TWO COMPARABLES NAMELY LAZARD INDIA LTD AND GEEFCEE FINANCE LIMITED CIT (A) ANALYZED THE SUBMISSIONS OF THE ASSESSEE AS WELL AS THE OBSERVATIONS OF THE TPO AND FINALLY REJECTED THE LAZARD INDIA LTD AS GOOD COMPARABLE AND INCLUDED THE GEEFCEE FINANCE LIMITED FOR CALCULATING THE ARITHMETIC MEAN OF THE PROFIT MARGINS. FURTHER ON THE COMPARABLES PROPOSED BY THE TPO I.E. (I) A.K. CAPITAL SERVICES LTD; (II) AJCON GLOBAL SERVICES LTD; (III) PIONEER INVESTCORP LTD; (IV) ICDS SECURITIES LTD (SEGMENTAL FINANCIAL & ADVISORY SERVICES); (V) SUMETHA FISCAL SERVICES (SEGMENTAL CONSULTANCY) AND (VI) BRESCON CORPORATE ADVISORS LTD THE CIT (A) CONDUCTED THE FAR ANALYSIS OF EACH OF THESE COMPARABLES AND FINALLY REJECTED THE SAME WITH THE EXCEPTION OF (I) SUMED HA FISCAL SERVICES AND (II) ICDS SECURITIES LTD. AT THE END CIT (A) CONCLUDED BY STATING THAT THE ARITHMETIC MEAN OF THE RESULTANT 6 COMPARABLES WORKED OUT TO 32.23%. THUS CO RRESPONDING ADDITION IS RESTRICTED TO RS. 1 50 00 672 / - ONLY. 11.1 RELEVANT DISCUSSION IS GIVEN IN PARA 12.6 TO 12.8 OF THE IMPUGNED ORDER AND THE SAID PARAS READ AS UNDER: 12.6. I HAVE CONSIDERED THE OBSERVATIONS OF THE TPO / AO IN RESPECT OF SIX COMPARABLES SELECTED BY HIM AS WELL AS THE ARGUMENTS OF THE APPELLANT AGAINST THEM. I AGREE WITH THE ARGUMENTS OF THE APPELLANT THAT M/S. A.K. CAPITAL SERVICES LTD. AJCON GLOBAL SERVIC ES LTD. PIONEER INVESTCORP INC. AND BTRESCON CORPORATE ADVISORS LTD ARE NOT COMPARABLE TO THE APPELLANT BECAUSE THEIR MAJORITY ACTIVITY IS IN FIELDS OTHER THAN FINANCIAL ADVISORY SERVICES. HOWEVER IN RESPECT OF SUMEDHA FISCAL SERVICES LTD AND ICDS SECUR ITIES LTD THE TPO HAS STATED THAT THEIR ARGUMENT DATA FOR FINANCIAL AND ADVISORY SERVICES ONLY HAS BEEN USED FOR COMPARABILITY. THE APPELLANT HAS NOT STATED ANYTHING IN THIS REGARD AND HAS ONLY CONTENDED THAT THE SAID COMPANIES ARE ENGAGED IN OTHER ACTIVI TIES BESIDES FINANCIAL AND ADVISORY SERVICES. SINCE THE TPO HAS CONSIDERED ONLY THE SEGMENTAL DATA 9 PERTAINING TO FINANCIAL & ADVISORY SERVICES OF THESE COMPANIES FOR THE PURPOSE OF COMPARABILITY WITH THE APPELLANT IN MY VIEW THESE TOW COMPANIES CANNOT BE EXCLUDED. THE ARGUMENTS OF THE APPELLANT DO NOT HAVE MUCH FORCE FOR EXCLUSION OF THESE COMPANIES. IN VIEW OF THE ABOVE DISCUSSION THEREFORE 4 COMPARABLES SELECTED BY THE APPELLANT AS DECIDED BY ME IN PARA NO.12.4 ABOVE AND TWO OF THE TPO I.E . SUMEDHA FISCAL SERVICES LTD AND ICDS SECURITIES LTD ARE HELD TO BE COMPARABLE TO THE APPELLANT. BASED ON THE ABOVE DISCUSSION THE FINAL SET OF COMPARABLE COMPANIES ARE AS FOLLOWS: 12.7. THE APPELLANT EARNS A MARGIN OF 15% FROM THE RENDERING OF INVESTMENT AD VISORY SERVICES TO ITS AE. ACCORDINGLY THE MARGIN EARNED BY THE APPELLANT OF 15% FALLS BELOW + 5% RANGE OF THE ALP AS DETERMINED ABOVE AND THUS DOES NOT SATISFY THE ARMS LENGTH PRINCIPLE. THE ADJUSTMENT TO THE INTERNATIONAL TRANSACTION SHALL THEREFORE BE WORKED OUT AS UNDER: TURNOVER (SERVICE FEES) 10 01 20 558/ - OPERATING PROFIT 1 30 59 203/ - TOTAL COSTS 8 70 61 355/ - OP / TC * 100 15% ARMS LENGTH MARGIN 32.23% PROFIT @ 32.33% OF COSTS 2 80 59 875/ - SHORTFALL 1 50 00 672/ - 12.8. IN VIEW OF THE ABOVE I HOLD THAT THE ADJUSTMENT OF RS. 1 50 00 672/ - SHALL BE WORKED OUT ON THE BASIS OF ALP BEING 32.33% OF TOTAL COSTS. AO IS DIRECTED ACCORDINGLY. B EFORE THE T RIBUNAL 12. AGGRIEVED WITH THE ABOVE DECISION OF THE CIT(A) FOR NON - INCLUSION OF THE LAZAR D INDIA LTD BAJAJ CAPITAL LTD FMEC INTERNATIONAL FINANCIAL SERVICES LIMITED WHICH ARE MAKING PERSISTENT LOSSES VIDE GROUND 4 THE ASSESSEE IS AGGRIEVED. OF COURSE ASSESSEE HAS NOT PRESSED THIS GROUND BEFORE US. THEREFORE WE HAVE ALREADY DISMISSED THE GROUND AS DISCUSSED IN THE OPENING PARAGRAPHS OF THIS ORDER. FURTHER ASSESSEE IS ALSO AGGRIEVED AGAINST INCLUSION OF OTHER TWO COMPARABLES NAMELY ICDS SECURITIES LTD AND SUMEDHA FISCAL SERVICES LTD AND GROUND 5 OF THE APPEAL ITA NO.5395/M/2009 IS RELEVANT . 10 13. PER CONTRA REVENUE IS ALSO AGGRIEVED AGAINST THE INCLUSION OF GEEFCEE FINANCE LIMITED WITH LOW MARGIN AND EXCLUSION OF 4 OTHER COMPARABLES I.E. (I) A.K. CAPITAL SERVICES LTD; (II) AJCON GLOBAL SERVICES LTD; (III) PIONEER INVESTCORP LTD AND (VI) BRESCON CORPORATE ADVISORS LTD WHICH WERE CONSIDERED BY THE TPO. FIRST WE SHALL TAKE UP THE ASSESSEES APPEAL FOR ADJUDICATION AND THE EFFECTIVE GROUNDS FOR ADJUDICATION ARE: 1.4 THAT THE LD TPO ERRED IN NOT MAKING SUITABLE ADJUSTMENTS TO THE NET PR OFIT MARGINS OF THE APPELLANT VIS - - VIS THE COMPARABLE COMPANIES FOR DIFFERENCE IN RISK PROFILE IN TERMS OF RULE - 10B OF THE I T RULES 1962. 1.5 THAT THE AO ERRED IN CALCULATING THE TRANSFER PRICING ADJUSTMENT WITHOUT CONSIDERING THE PERMITTED + / - 5% VARIATION FROM THE ARMS LENGTH PRICE A S PER PROVISO TO SECTION 92C(2) OF THE ACT. 5. IN ACCEPTING TWO ADDITIONAL COMPANIES I.E. ICDS SECURITIES LTD AND SUMEDHA FISCAL SERVICES LTD SELECTED BY THE LD TPO AS COMPA RABLE TO THE ACTIVITY OF INVESTMENT ADVISORY SERVICES PROVIDED BY THE APPELLANT ON THE GROUND THAT SEGMENTAL DATA HAS BEEN USED FOR COMPARISON PURPOSES THEREBY MAKING IT SIMILAR TO THE ACTIVITY OF THE APPELLANT WHEREAS THE FACT REMAINS THAT THE SAID COMP ANIES ARE NOT COMPARABLE TO THE APPELLANT ON ACCOUNT OF DIFFERENCE IN FUNCTIONS / ACTIVITY. ACCORDINGLY THE FINDING OF THE LD CIT (A) IS ERRONEOUS AND PERVERSE. 14. SHRI PORUS KAK A LD COUNSEL FOR THE ASSESSEE BROUGHT OUR ATTENTION TO THE GROUND 5 ABOVE AND MENTIONED THAT THE DECISION OF INCLUSION OF THE SAID TWO COMPARABLES NAMELY ICDS SECURITIES LTD AND SUMEDHA FISCAL SERVICES LTD BY THE CIT(A) IS PERVERSE. LD COUNSEL POINTED OUT HOW THESE TWO COMPARABLES ARE FUNCTIONALLY DISTINGUISHABLE TO THAT OF THE ASSESSEE AND HOW THE DECISION OF CIT (A) IS NOT SUSTAINABLE . THE RELEVANT ARGUMENTS IN EACH OF THE COMPARABLES ARE GIVEN IN THE SUCCEEDING PARAGRAPHS. 15. M/S ICDS SECURITIES LTD: LD COUNSEL BROUGHT OUR ATTENTION TO PAGE 214 OF THE PAPER BOOK AND MENTIO NED THAT THE ICDS SECURITIES LTD IS ENGAGED PRIMARILY IN CREDIT CARD SERVICES IN ASSOCIATION WITH STANDARD CHARTERED BANK. REFERRING TO PAGE 223 OF THE PAPER BOOK LD COUNSEL MENTIONED THAT ASSESSEES OPERATING INCOME IS RS. 2.67 CRS AND IT INCLUDES B ROKING AND SHARE TRADING INCOME OF RS. 2.08 CRS AND FUNCTIONAL & ADVISORY SERVICES INCOME OF ONLY RS.5 03 418/ - . REFERRING TO PAGE 234 OF THE PAPER BOOK SHOWING THE SEGMENT ACCOUNTING OUT OF THE SUM OF RS. 56 03 418/ - THE SUM OF RS. 5.76 LACS IS EARNED ON ACCOUNT OF DEBENTURE TRUSTEE FEE AND THE BALANCE OF RS. 50 27 417/ - IS EARNED ON 11 ACCOUNT OF CREDIT CARD SERVICE CHARGES RECEIVED FROM STANDARD CHARTERED BANK TOWARDS CREDIT CARD SERVICES. IT IS THE ARGUMENT OF LD COUNSEL THAT THE ICDS SECURITIES LTD HAS NOT EARNED ANY INCOME ON ACCOUNT OF ADVISORY SERVICES THOU GH THE INCOME IS WRONGLY CATEGORIZED UNDER THE HEAD FUNCTIONAL ADVISORY SERVICES. THUS THE ICDS SECURITIES LTD IS NOT A GOOD COMPARABLE FUNCTIONALLY. 16. M/S SUMEDHA FISCAL SERVICES LTD : REGARDING SUMEDHA FISCAL SERVICES LTD THE ARGUMENT OF THE LD COU NSEL IS THAT THIS IS NOT A GOOD COMPARABLE TOO. BRINGING OUR ATTENTION TO PAGE 164 OF THE PAPER BOOK LD COUNSEL MENTIONED THAT THE ASSESSEE EARNED INCOME FROM OPERATION AMOUNTING TO RS. 2.99 CRS THE BREAKUP OF WHICH IS GIVEN IN PAGE 174 AND SCHEDULE - 12 IS RELEVANT IN THIS REGARD WHICH IS AS UNDER: SCHEDULE - 12 INCOME FROM OPERATIONS INCOME FROM LOAN SYNDICATION & PROJECT CONSULTANCY SERVICES: RS. 19 879 018/ - INCOME FROM CAPITAL MARKET OPERATION RS. 10 040 800/ - RS. 29 919 818/ - FURTHER PAGE 178 OF THE PAPER BOOK PROVIDES THE SEGMENTAL REPORTING AND NO INCOME IS REPORTED HAVE BEEN RECEIVED FOR THE ADVISORY SERVICES AND THE INCOME EARNED BY THE ASSESSEE IS ON ACCOUNT OF LOAN SYNDICATION AND PROJECT CONSULTANCY SERVICES AS WELL AS FROM CAPITAL MARKET OPERATIONS . THESE OPERATIONS ARE ENTIRELY DISTINGUISHABLE AND DIFFERENT FROM THAT THE OF THE IAS. LD COUNSEL HEAVILY RELIED ON THE DECISION OF THE TRIBUNAL IN THE CASE OF CARLYLE INDIA ADVISORS PRIVATE LTD VS. ACIT VIDE ITA NO.7901/MUM/ 2011 (AY 2007 - 08) DATED 4.4.2012 AND MENTIONED THAT THE SAID COMPANY IS FUNCTIONALLY COMPARABLE TO THAT OF THE ASSESSEE. CONSEQUENTLY THE COMPANY WHICH SHOULD NOT BE FOUND TO BE GOOD COMPARABLE WITH CARLYLE INDIA ADVISORS PRIVATE LTD IS EQUALLY NOT GOOD ONE FOR THE PRESENT ASSESSEE TOO. IN THIS REGARD LD COUNSEL BROUGHT OUR ATTENTION TO THE ORDER OF THE TRIBUNAL IN THE CASE OF CARLYLE INDIA ADVISORS PRIVATE LTD SUPRA AND BROUGHT OUR ATTENTION TO PARA 27 WHERE THE T RIBUNAL DEALT WITH THE CASE OF SUMEDH A FISCAL SERVICES LTD AND FOUND NOT A GOOD COMPARABLE. FURTHER HE MENTIONED THAT THE SAID ORDER OF THE TRIBUNAL REACHED JURISDICTIONAL HIGH COURT WHEREIN THE ORDER OF THE TRIBUNAL WAS CONFIRMED IN FAVOUR OF THE ASSESSEE. THUS IT IS BINDING ON US THAT T HE CASE OF M/S SUMEDHA FISCAL SERVICES LTD IS NOT A GOOD 12 COMPARABLE FUNCTIONALLY FOR THE PRESENT ASSESSEE QUA CARLYLE INDIA ADVISORS PRIVATE LTD . PARA 2 OF THE SAID JUDGMENT OF THE HIGH COURT IS RELEVANT HERE. 17. FURTHER REFERRING TO GROUND 1.4 OF THE APPEAL LD COUNSEL MENTIONED THAT THE ASSESSEE IS ENTITLED TO THE RISK ADJUSTMENT AND IS CRITICAL OF THE ORDER OF THE CIT(A) ON THIS ISSUE. THE FACT OF DISPOSING THE GROUND WITHOUT MAKING A MENTION TO THIS ISSUE IN THE IMPUGNED ORDER OF THE CIT(A) I S ALSO HIGHLIGHTED BY LD COUNSEL. REFERRING TO GROUND NO.1.5 LD COUNSEL ARGUED THAT THE SAME IS CONSEQUENTIAL AND THE GROUND DEPENDS ON THE FINAL COMPUTATION OF THE ARITHMETIC MEAN OF AL MARGIN. 18. ON THE OTHER HAND LD DR RELIED ON THE ORDER OF THE AO/T PO/CIT(A). HOWEVER REGARDING THE RISK ADJUSTMENT LD CIT - DR IS OF FIRM OPINION THAT THE GRANT OF THE RISK ADJUSTMENT IS NOT A MATTER OF RULE OR RIGHT. CONSIDERING THE FACT THE ASSESSEE HAS NOT SUBSTANTIATED THE CLAIM WITH THE FACTS AND THE FIGURES ON THE EXISTENCE OF THE RISK IN THE BUSINESS OF THE COMPARABLE QUA THE ASSESSEE THERE IS NO NEED FOR SUC H GRANTING OF THE ADJUSTMENTS. REGARDING GROUND NO. 1.5 LD DR HAS NOTHING SPECIFIC TO ARGUE. 19. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE ORDERS OF THE REVENUE AUTHORITIES AS WELL AS THE ORDER OF THE TRIBUNAL AND OTHERS PLACED BEFORE US. HOWEVER THERE IS NO DISPUTE WITH REGARD TO THE ALLIANZ SECURITIES LTD; KEYNOTE CORPORATE SERVICES LTD AND SREI CAPITAL MARKETS LTD AS THE FINAL COMPARABLES. IN OUR OPI NION IT IS APPROPRIATE TO SUMMARIZE THE LIST OF COMPARABLES BY THE CHOSEN ASSESSEE TPO AND THE CIT (A) AS COMPARABLE AND THEY ARE SUMMARIZED AS UNDER: DETAILS OF COMPARABLES SNO (AS PER THE ASSESSEE VIDE HIS LETTER DATED 21.2.2008) AS PER THE TPO AS PER THE CIT (A) 1 ALLIANZ SECURITIES LTD ALLIANZ SECURITIES LTD ALLIANZ SECURITIES LTD 2 KEYNOTE CORPORATE SERVICES KEYNOTE CORPORATE SERVICES KEYNOTE CORPORATE SERVICES 3 SREI CAPITAL MARKETS LTD SREI CAPITAL MARKETS LTD SREI CAPITAL MARKETS LTD 4 BAJAJ CAPITAL LTD REJECTED REJECTED 5 FMEC INTERNATIONAL FINANCIAL SERVICES LIMITED REJECTED REJECTED 6 LAZARD INDIA LTD REJECTED REJECTED 7 GEEFCEE FINANCE LIMITED REJECTED GEEFCEE FINANCE LIMITED 8 A.K. CAPITAL SERVICES LTD REJECTED 9 AJCON GLOBAL SERVICES LTD REJECTED 10 BRESCON CORPORATE ADVISORS LTD REJECTED 11 ICDS SECURITIES LTD (SEG. CONSULTANCY) ICDS SECURITIES LTD (SEG. CONSULTANCY) 12 PIONEER INVESTCORP LTD REJECTED 13 SUMEDHA FISCAL SERVICES LTD(SEG) REJECTED 7 COMPARABLES 9 COMPARABLES 5 COMPARABLES 13 THE LIMITED ISSUE BEFORE US FOR ADJUDICATION RELATES TO THE JUSTIFICATION FOR INCLUSION OF THE TWO COMPARABLE S NAMELY ICDS SECURITIES AND SUMEDHA FISCAL SERVICES LTD AS GOOD ONES. ADJUDICATION IN THIS REGARD ARE DISCUSSED AS UNDER: JUSTIFICATION FOR INCLUSION OF M/S ICDS SECURITIES LTD AS GOOD COMPARABLE 20. THE BRIEF ARGUMENTS OF THE LD COUNSEL IS WHETHER THE ICDS SECURITIES LTD WHICH IS ENGAGED IN THE STOCK BROKING BUSINESS AND MARGIN BANKING BACKING BUSINESS IS FUNCTIONALLY DIFFERENT THEREFORE IT IS NOT AN APPROPRIATE COMPARABLE. IN THIS REGARD WE HAVE PERUSED THE DATA PLACED BEFORE US VIDE PAGE NOS. 214 223 234 230 ETC. OF THE PAPER BOOK AND FIND THAT NO IT EM OF ITS INCOME WAS DERIVED BY THE IS COMPANY FROM RENDERING OF THE INVESTMENT ADVISORY SERVICES. THEREFORE IN OUR OPINION THE ARGUMENTS OF THE LD COUNSEL HAVE TO BE ACCEPTED. FURTHER WE HAVE ALSO GONE THROUGH THE DECISION OF THE TRIBUNAL IN THE ASSE SSEES OWN CASE VIDE ITA NO.4203/M/2012 AND ITA NO.6504/M/2012 DATED 30.8.2012 IN GENERAL AND PARA 53 IN PARTICULAR WHEREIN THE TRIBUNAL HELD THAT THE STOCKING BROKING COMPANIES ARE NOT GOOD COMPARABLES ON FAR ANALYSIS WITH THAT OF THE ASSESSEE COMPANY W HICH IS ENGAGED IN INVESTMENT ADVISORY SERVICES. ASSESSEE IS NOT ENGAGED IN LOAN SYNDICATION OR CAPITALIZATION OF FUNDS FROM THE INVESTORS AND HE IS NOT ENGAGED IN MARKETING INVESTMENT AND MANAGEMENT OF FUNDS MOBILIZING UNDER VARIOUS SCHEMES. THE COMPAR ABLE OF THIS KIND WHICH IS RESPONSIBLE FOR PROVIDING MANAGEMENT AND ADMINISTRATIVE SERVICES ON ONE SIDE AND PROVIDING THE CREDIT CARD SERVICES ON THE OTHER THE COMPANY IS ENTIRELY ON A DIFFERENT FUNCTION. THESE FUNCTIONAL ON ONE SIDE AND THE IAS OF THE A SSESSEE ON THE OTHER BELONG TO DIFFERENT GENERA OF THE FUNCTIONS. THEREFORE WE FIND THE CIT(A) HAS NOT CORRECT IN INCLUDING THE COMPANY IN THE LIST OF COMPARABLE. HENCE WE SET ASIDE THE ORDER OF THE CIT(A) IN THIS REGARD AND DIRECT THE AO / TPO / CIT (A) TO EXCLUDE M/S ICDS SECURITIES LTD IN THE LIST OF THE COMPARABLE AS IT IS OF DIFFERENT FUNCTION. ACCORDINGLY WE ORDER IN FAVOUR OF THE ASSESSEE . JUSTIFICATION FOR INCLUSION OF M/S SUMEDHA FISCAL SERVICES LTD AS GOOD COMPARABLE 14 21. REGARDING THE INCLUSION OF THE M/S SUMEDHA FISCAL SERVICES LTD AS GOOD COMPARABLE IT IS THE ARGUMENT OF THE LD COUNSEL THAT IT IS NOT ENGAGED IN PROVIDING ADVISORY SERVICES AND THE SAME IS INCOMPARABLE TO THE FUNCTIONS RENDERED BY THE ASSESSEE WHICH ARE A KIN TO THE FUNCTIONS OF M/S CARLYLE INDIA ADVISORS PVT. LTD (SUPRA). CARLYLE INDIA ADVISORS PVT. LTD IS A SUBSIDIARY OF CARLYLE HONG KONG AND IT PROVIDES ADVISORY RELATED SERVICES TO CARLYLE HONG KONG. LD COUNSEL FURTHER ARGUED THAT SUMEDHA FISCAL SERVIC ES WAS PICKED UP AS COMPARABLE TO THAT OF THE CARLYLE INDIA ADVISORS PVT. LTD AND THE SAID COMPARABLE WAS REJECTED BY THE TRIBUNAL IN THE CASE OF CARLYLE INDIA ADVISORS PVT. LTD (SUPRA) FOR THE AY 2007 - 2008. IN THIS CASE SUMEDHA FISCAL SERVICES LTD WAS REJECTED AS COMPARABLE AND THE SAID DECISION OF THE TRIBUNAL WAS APPROVED BY THE BINDING DECISION OF THE JUDGMENT OF THE JURISDICTIONAL HIGH COURT. RELEVANT DISCUSSION IS GIVEN IN PARA 27 OF THE SAID ORDER OF THE TRIBUNAL WHICH IS AS UNDER: 27. WE WILL N OW CONSIDER 8 COMPARABLE CASES SELECTED BY THE TPO AND SEE WHETHER THEY CAN BE FUNCTIONALLY COMPARED WITH THAT OF THE ASSESSEE. (1).. (2)... (3) M/S. SUMEDHA FISCAL SERVICES LTD (III) M/S. SUMEDHA FISCAL SERVICES LTD ON THE GROUND THAT THE COMPANY ON A QUALITATIVE REVIEW AND FOR THE REASON THAT ITS INCOME IS FROM LOAN SYNDICATION AND PROJECT CONSULTANCY SERVICES. IN THE FINAL LIST THE TPO HAS INCLUDED THESE COMPANIES AS COMPARABLE COMPANIES. THE TPO HAS GIVEN NO REASON WHATSOEVER FOR CHANGING HIS STAND. APART FROM THE ABOVE THE ASSESSEE IN ITS SUBMISSIONS DATED 19.10.2010 FILED BEFORE THE TPO HAD HIGHLIGHTED AS TO HOW THESE COMPANIES ARE NOT FUNCTIONALLY COMPARABLE WITH THAT OF THE ASSESSEE. THE TPO HAS NOT EVEN CONSIDERED THESE OBJECTIONS. WE HAVE SEEN THE REASONS GIVEN BY THE ASSESSEE AS TO WHY THESE COMPANIES S HOULD NOT BE TREATED AS COMPARABLE COMPANIES AND T HEY ARE PART OF THE REPLY DATED 19.10.2010 FILED BY THE ASSESSEE BEFORE THE TPO (THE WHOLE REPLY IS AT 127 TO 573 OF THE ASSESSEES PAPER BOOK). ON PERUSAL OF THE REASONS SO GIVEN WE ARE OF THE VIEW THAT THESE COMPANIES ARE NOT FUNCTIONALLY COMPARABLE WI TH FUNCTIONS PERFORMED BY THE ASSESSEE . 22. THE ORDER OF THE TRIBUNAL WHICH IS LATER CONFIRMED BY THE JURISDICTIONAL HIGH COURT IS CLEAR ON THE FACT THAT THE CARLYLE INDIA ADVISORS PRIVATE LTD SUPRA IS ENGAGED IN THE INVESTMENT ADVISORY S ERVICES (IAS) A ND THE SO CALLED COMPARABLE CASE OF SUMEDHA FISCAL SERVICES LTD IS FOUND TO BE NOT A GOOD COMPARABLE. THUS IT IS BINDING ON US THAT THE CASE OF M/S SUMEDHA FISCAL SERVICES LTD IS NOT A GOOD COMPARABLE FUNCTIONALLY EVEN TO THE PRESENT ASSESSEE WHOSE FUNC TION IS IAS. PARA 2 OF THE SAID JUDGMENT OF THE HIGH COURT IS RELEVANT. 15 23. THUS THE ASSESSEES FUNCTION OF INVESTMENT ADVISORY SERVICES (IN SHORT IAS) INVOLVE MONITORING GATHERING OF INVESTMENT RELATED DATA AND SUPPLY TO THE PARENT COMPANY AT SINGA PORE AND IN SUBSTANCE THE SAME IS INCOMPARABLE TO THE FUNCTIONS OF (I) BROKING AND SHARE TRADING AND OFFER OF CREDIT CARD S ERVICES TO STANDARD CHARTERED BANK; AND (II) LOAN SYNDICATION AND PROJECT CONSULTANCY SERVICES / CAPITAL MARKET OPERATIONS AS DISCUSSED IN THE ABOVE. THUS THESE TWO SETS OF FUNCTIONS BELONG TO DIFFERENT GENERA. THUS THE BASIS REQUIREMENT OF THE FAR ANALYSIS WHICH IS THE INTEGRAL PART OF THE TRANSFER PRICING STUDY IS NOT MET SO AS TO JUSTIFY THE INCLUSION OF THE SAID TWO COMPARABLE. THIS BASIC PRINCIPLE IS REPEATEDLY AFFIRMED BY THE TRIBUNAL RIGHT FROM THE BEGINNING AS EVIDENT FROM PLETHORA OF JUDGMENTS. IN TP STUDIES THERE IS NEED FOR DIGGING EVERY AVAILABLE INFORMATION IN THE PUBLIC DOMAIN RELATING THE COMPARABLE COMPA NIES FOR FAR STUDIES AND IN CASE THE PROVISIONS OF SECTION 133A(6) ARE INVOKED AO/TPO IS BOUND TO MAKE AVAILABLE RELEVANT INFORMATION TO THE ASSESSEE BEFORE PICKING UP A COMPANY FOR TP STUDIES. OF COURSE IT IS THE EXPECTATION OF THE TNMM METHOD THAT ONLY BROAD COMPARISONS ARE SUFFICIENT. AT THE SAME IT SHOULD NOT BE CASE THAT THE FUNCTIONS OF SHARE BROKING OR CREDIT CARD SERVICES OR FUNCTION OF LOAN SYNDICATION AND PROJECT CONSULTANCY SERVICES ARE TREATED ON PAR WITH THE IAS OFFERED BY THE ASSESSEE. THE PROVISIONS OF THE RULE10B(2) ARE RELEVANT HERE . THEREFORE CONSIDERING THE ABOVE FUNCTIONAL DIFFERENCES OF THE IMPUGNED TWO COMPARABLES QUA THE ASSESSEE WE ARE OF THE OPINION THAT GROUND NO.5 RAISED BY THE ASSESSEE HAS TO BE ALLOWED IN HIS FAVOUR. AO IS DIRECTED TO CONSIDER THE ABOVE DIRECTION AND AMEND HIS ORDER. ACCORDINGLY GROUND 5 IS ALLOWED. 24. GROUND 1.4 RELATES TO THE CLAIM OF RISK ADJUSTMENT. WE FIND THE ASSESSEE HAS NOT BROUGHT OUT ANY FACTS BEFORE US TO DEMONSTRATE THAT THE CLAIM OF RISK IS S UPPORTED BY THE FACTS AND FIGURES. IT IS THE DECIDED CASE THAT THE GRANT OF RISK ADJUSTMENT IS NOT AUTOMATIC OR OF GENERAL RULE. ASSESSEE NEEDS TO DEMONSTRATE WITH FIGURES THAT THE IMPUGNED RISKS HAVE MATERIAL EFFECT ON THE OPERATING MARGINS QUA THE TOTAL COST. RELIANCE IS PLACED ON THE D ECISION OF THE TRIBUNAL IN THE CASE OF M/S. PREMIER EXPLORATION SERVICES PVT. LTD VS. ITO VIDE ITA NO.4935/DEL/2011 (AY: 2007 - 2008) ORDER DATED 31.5.2013 FOR THE PROPOSITION THAT THE RISK ADJUSTMENTS CANNOT BE ALLOWED AS A GENERAL RULE AND THE ASSESSEE IS UNDER OBLIGATION TO 16 DEMONSTRATE THE EXISTENCE OF RISK WITH THE HELP OF DATA AND THEY ARE MATERIALLY AFFECT THEIR MARGINS . THE TAX PAYER NEEDS TO DEMONSTRATE THAT THE RISK IS TRAN SLATED INTO CHARGING A HIGHER MARGIN IN COMPARABLE COMPANIES. THE RELEVANT PARA 10 OF THE SAID ORDER OF THE TRIBUNAL READS AS UNDER: 10. AFTER HEARING BOTH THE SIDES ON THIS ISSUE WE FIND NO MERITS IN THE TAXPAYERS CLAIM FOR RISK ADJUSTMENT. RISK ADJU STMENT CANNOT BE ALLOWED AS A GENERAL RULE . IT CAN ONLY BE CONSIDERED WHEN IT IS DEMONSTRATED THAT COMPARABLES HAD ACTUALLY UNDERTAKEN SUCH RISK AND THESE ARE MATERIALLY AFFECTED THEIR MARGINS. UNLESS IT IS SHOWN THAT RISK ADJUSTMENT HAD CHANGED THE RES ULT OF EACH COMPARABLE AND THERE ARE ADEQUATE REASONS FOR SUCH ADJUSTMENT NO ADJUSTMENT IS JUSTIFIED. IN ABSENCE OF ANY SUCH SITUATION NO ADJUSTMENT CAN BE ALLOWED. IN OUR CONSIDERED VIEW TAXPAYER HAS NOT BEEN ABLE TO SHOW HOW THIS RISK IF ANY IS TR ANSLATED INTO CHARGING A HIGHER MARGIN IN COMPARABLE COMPANIES. SIMILARLY THE ASSESSEES CLAIM THAT IT HAS NO MARKET RISK IS ALSO NOT ACCEPTABLE. ASSESSEE PROVIDES SERVICE TO ITS GROUP COMPANY ONLY. SINGLE CUSTOMER RISK IS ALSO A MARKET RISK. THE PERF ORMANCE OF COMPANY IN SUCH CASES IS ENTIRELY DEPENDENT ON THE ASSOCIATED ENTERPRISES (AE). AS SOON AS THE AE RUNS OUT OF THE BUSINESS OR IF AES BUSINESS GETS REDUCED SUBSTANTIALLY THEN THE BUSINESS OF THE ASSESSEE WILL ALSO GET ADVERSELY EFFECTED ACCORDI NGLY. BEING A CAPTIVE SERVICE PROVIDER THE ASSESSEE CANNOT LOOK FOR OTHER CUSTOMERS. IN SUCH CASES THE A S SESSEE RUNS A GREATER RISK THAN AN AVERAGE INDEPENDENT ENTITY WHO CAN ALWAYS OVERCOME THE RISK BY LOOKING FOR OTHER CUSTOMERS OR OTHER MARKET. THE DEPENDENCE ON THE PARTICULAR CLIENT OR A PARTICULAR GEOGRAPHY AREA ALONG IS ALWAYS CONSIDERED A HIGH RISK. IT CAN BE SEEN FROM THE FINANCIAL CRISIS IN 2008 - 09 IN USA AS A RESULT OF SUBPRIME CRISIS MANY COMPANIES WHICH WERE COMPLETELY DEPENDENT ON USA CLIENTS DIVERSIFIED TO THE OTHER AREAS TO OVERCOME THE RISK. FURTHER CREDIT RISK WAS EXISTED IN ASSESSEES CA SE AS THERE WAS NO CLAUSE IN AGREEMENT THAT ADVANCE PAYMENT SHALL BE MADE FOR SERVICES. THEREFORE IN OUR CONSIDERED VIEW THIS GROUND OF THE ASSESSEE HAS NO MERITS. 24.1. THE ABOVE CONCLUSIONS ARE AFFIRMED IN MANY OTHER DECISIONS OF THE TRIBUNAL LIKE THE DECISION OF ITAT MUMBAI BENCH IN THE CASE OF M/S. WILLS PROCESSING SERVICES (I) P LTD VS. CIT VIDE ITA NO.4547/M/2012 AND 4429/M/2012 (AY: 2007 - 2008). CONSIDERING THE ABOVE SETTLED NATURE OF THE ISSUE AND ALSO RESPECTFULLY FOLLOWING THE DECISION OF THE COORDINATE BENCH OF ITAT DELHI WE ARE OF THE OPINION THAT THE GROUND RAISED BY THE ASSESSEE IS DECIDED AGAINST THE ASSESSEE. ACCORDINGLY GROUND 1.4 OF THE ASSESSEE IS DISMISSED . 25. GROUND 1.5 RELATES TO APPLICATION OF THE PROVISO TO SECTION 92C(2) OF THE ACT (+/ - 5%) AND WE FIND THIS GROUND IS CONSEQUENTIAL IN NATURE AND THEREFORE WE ORDER THE AO TO COMPUTE THE MARGINS AND APPLY THE PROVISO IN ACCORDANCE WITH THE LAW IN FORCE. ACCORDINGLY GROUND 1.5 IS ALLOWED AS CONSEQUENTIAL . 26. IN THE RESULT APPE AL OF THE ASSESSEE IS PARTLY ALLOWED . 17 ./ I.T.A. NO.5616/M/2009 (AY: 2005 - 2006) (BY REVENUE) 27 . THIS CROSS APPEAL FILED BY THE REVENUE ON 15.10.2009 IS AGAINST THE ORDER OF THE CIT (A) - XXXII MUMBAI DATED 20.7.2009 FOR THE ASSESSMENT YEAR 2005 - 2006. THE ONLY EFFECTIVE GROUND RAISED BY THE REVENUE IN THIS APPEAL READS AS UNDER: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE CIT (A) ERRED IN GIVING A RELIEF TO THE ASSESSEE OF RS. 1 17 01 045/ - TAKING THE ARMS LENGTH M ARGIN # 32.25% INSTEAD OF 45.67% AS TAKEN BY THE TPO. 28 . AT THE OUTSET ELABORATING THE ABOVE MENTIONED GROUND LD DR MENTIONED THAT THE CIT (A) GRANTED RELIED TO THE ASESSEE TO THE TUNE OF RS. 1 17 01 045/ - BY TAKING ARMS LENGTH MARGIN @ 32.25% INSTEAD OF 45.67% DETERMINED BY THE TPO. THE CHANGE IN THIS MARGIN IS ON ACCOUNT OF ACCEPTING BY THE CIT(A) THE: (I) M/S. GEEFCEE FINANCE LIMITED WITH THE OPERATING MARGIN OF 0.26% AND (II) REJECTION BY THE CIT(A) OF FOUR OTHER COMPARABLES I.E. (I ) A.K. CAPITAL SERVICES LTD; (II) AJCON GLOBAL SERVICES LTD; (III) PIONEER INVESTCORP LTD AND (VI) BRESCON CORPORATE ADVISORS LTD WHICH WERE OTHERWISE CONSIDERED BY THE TPO. WE SHALL NOW PROCEED TO ANALYSE THE JUSTIFICATION OF THE ABOVE CONCLUSION OF THE CIT(A) IN THE SUCCEEDING PARAGRAPHS OF THIS ORDER. A. JUSTIFICATION FOR INCLUSION OF GEEFCEE FINANCE L TD AS GOOD COMPARABLE 29 . BEFORE US LD DR MADE A LEGAL PROPOSITION THAT LOSS MAKING COMPANY DO NOT CONSTITUTES GOOD COMPARABLE FOR THE PROFIT MAKING ASSESSEE LIKE THE PRESENT ONE. IN THIS REGARD HE RELIED ON VARIOUS BINDING COORDINATE BENCH DECISIONS OF THIS TRIBUNAL. FURTHER HE MENTIONED THAT THE M/S GEEFCEE FINANCE LIMITED WITH THE OPERATING MARGIN OF 0.26% IS NOT OPERATING PROFIT OF THE COMPERABLE BUSINESS. TH IS CASE HAS REGISTERED OPERATING LOSSES CONSISTENTLY FOR THREE YEARS AND FILED FINANCIAL STATEMENTS FOR THREE FYS ENDING ON 31 ST MARCH 2003 2004 AND 2005. SRI AJEETH JAIN CIT DR STATED THAT IT IS A CASE OF PERSISTENT OPERATIONAL LOSS . IN THIS REGARD LD DR TABULATED THE OPERATIONAL LOSSES OVER COST. RELEVANT TABLE AS MODIFIED AS FOLLOWS: 18 30 . FURTHER TO SUBSTANTIATE THE ABOVE LEGAL PROPOSITION LD DR FILED A COPY OF THE ORDER OF THE TRIBUNAL IN THE CASE OF M/S ADVANCE POWER DISPLA Y SYSTEMS LTD VS. ACIT VIDE APPEAL ITA NO.6732/M/2011 & ITA NO.6542/M/2011 (AY: 2003 - 2004) ORDER DATED 8.5.2013 AND BROUGHT OUR ATTENTION TO THE CONTENTS OF PARA 10.2 FOR THE SAID LEGAL PROPOSITION. 3 1 . PER CONTRA LD COUNSEL FOR THE ASSESSEE ARGUED STRON GLY JUSTIFYING THE INCLUSION OF THE CASE OF M/S. GEEFCEE FINANCE LIMITED FOR ALM STUDIES AND FAR STUDIES . SRI PORUS KAKA LD COUNSEL FOR THE ASSESSEE FURTHER MENTIONED THAT SIMILAR ISSUE WAS ADJUDICATED BY THE SPECIAL BENCH ITAT CHANDIGARH IN THE CASE OF DCIT VS. QUARK SYSTEMS (P) LTD [2010] 132 TTJ (CHD) (SB) 1 AND THE SB DECISION IS MORE BINDING ON THE TRIBUNAL. DURING THE REBUTTAL TIME LD DR DISTINGUISHED THE SPECIAL BENCH DECISION (SUPRA) BY STATING THAT THE CASE DEALT WITH BY THE SPECIAL BENCH IS NOT A COMPANY WITH PERSISTENT LOSSES UNLIKE THE CASE OF M/S. GEEFCEE FINANCE LIMITED. 32 . WE HAVE HEARD BOTH PARTIES ON THIS ISSUE. THE ISSUE IS IF A COMPANY WITH PERSISTENT LOSSES CAN BE CONSIDERED AS GOOD COMPARABLE FOR ALM STUDIES AND THE IF THE CASE OF M/S. GEEFCEE FINANCE LIMITED IS ONE SUCH COMPANY. IN THIS REGARD WE HAVE PERUSED THE CITED SB DECISION AND FIND THAT THE SAME IS RELEVANT FOR THE PROPOSITION THAT IF IC HAS SUFFERED HEAVY LOSSES AND THEREFORE IT IS NOT TREATED AS COMPARABLE BY THE TAX AUTHORITIES THEY ALSO HAVE TO CONSIDER THAT THE DM HAS EARNED EXTRAORDINARY PROFIT AND HAS A HUGE TURNOVER BESIDES DIFFERENCES IN ASSETS AND OTHER CHARACTERISTICS MATTER IS THEREFORE REMITTED TO THE FILE OF THE AO FOR 19 CONSIDERATION OF CLAIM OF THE TAXPAYER AND MAKE A DE NOVO ADJUDICATION OF THE ALP AFTER PROVIDING REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. THERE FORE THE MATTER IS REMANDED AND THERE IS NO FINALITY IN THE MATTER. THERE IS NO DATA TO DEMONSTRATE THE SAID FACTS ARE COMPARABLE TO THAT OF THE M/S. GEEFCEE FINANCE LIMITED TOO. IN OUR VIEW TH E ONUS SINCE THE ARGUMENT IS R AISED BY THE ASSESSEES COUNSE L IN ON THE ASSESSEE TO DEMONSTRATE. 33 . FURTHER WE HAVE GONE THROUGH THE OPERAT ING MARGIN AND TOTAL COST RATIO S FOR THE THREE YEARS ENDING WITH THE RELEVANT AY AND FIND THE M/S. GEEFCEE FINANCE LIMITED IS IN LOSSES FOR THE PAST THREE YEARS. FURTHER WE FIND THE PROFIT OF 0.26% CONSIDERED BY THE CIT(A) IS NOT OPERATING PROFIT MARGIN BUT THE COMPANYS PROFIT RATIO AFTER CONSIDERING THE OTHER INCOME TOO. IN SUBSTANCE THIS PROFIT PERCENTAGE OF 0.26% IS NOT GOOD FOR COMPARATIVE ANALYSIS UNDER TNMM METHOD WI TH OC / TC ON PLI . THEREFORE IN PRINCIPLE THE ORDER OF THE CIT(A) IS INCORRECT ON HIS CONCLUSION AND HOWEVER THE SAME IS SUBJECT TO THE VERIFICATION OF THE LOSS PERCENTAGES OF OC/TC FOR THE THREE YEARS. AS THIS DATA IS NOT AVAILABLE BEFORE THE CIT(A) TO O. 3 4 . WE HAVE ALSO PERUSED THE DECISIONS CITED BY THE DR IN CONNECTION HIS ARGUMENT ON THE PERSISTENT LOSS MAKING AS NOT GOOD COMPARABLES AND RELEVANT PICK FROM THE CONTENTS OF PARA 10.2 FROM THE ORDER OF THE ITAT OF M/S ADVANCE POWER DISPLAY SYSTEMS LTD READS AS UNDER: 10.2. EVEN OTHERWISE WHEN THE COMPARABILITY OF THE CASE HAS TO BE TESTED INDEPENDENTLY FOR EACH YEAR THEN WITHOUT EXAMINATION OF THE COMPARABILITY NO CASE CAN BE ACCEPTED AS A COMPARABLE SOLELY ON THE BASIS THAT IT HAS BEEN ACCEPTED AS COMP ARABLE IN THE SUBSEQUENT YEAR. FROM THE ANNUAL REPORT OF THE COMPANY M/S. BCC FUBA INDIA LTD. IT IS CLEAR THAT THIS COMPANY IS SHOWING PERSISTING LOSS FROM THE YEAR AFTER YEAR AND THEREFORE IN VIEW OF THE SERIES OF DECISIONS OF THIS TRIBUNAL ON TH E POINT THAT PERSISTING LOSS MAKING COMPANY CANNOT BE CONSIDERED AS GOOD COMPARABLE FOR THE PURPOSE OF DETERMINATION OF THE ALP. 35 . THE ABOVE DECISION WAS GIVEN ON THE FOLLOWING FACTUAL MATRIX OF THE CASE. 9.1IN THE LAST MORE THAN THREE YEARS THIS COMPANY IS MAKING LOSS AND THEREFORE IN VIEW OF THE DECISION OF THE HYDERABAD BENCHES OF THE TRIBUNAL IN THE CASE OF M/S. BRIGADE GLOBAL SERVICES P LTD AS WELL AS OF THIS TRIBUNAL IN THE CASE OF M/S. PFIZER LTD THIS COMPANY CANNOT BE CONSIDERED AS GOOD C OMPARABLE . 36 . FROM THE ABOVE IT IS EVIDENT THAT A COMPANY MAKING PERSISTENT LOSSES FOR THE PAST THREE YEARS LIKE THE PRESENT ASSESSEE IS NO GOOD COMPARABLE. TO ELABORATE FURTHER WHEN A LOSS MAKING ENTITY IS SELECTED FOR COMPARISON IN TP STUDIES FOR 20 NEC ESSARY WHICH IS A PROFIT MAKING ONE THERE IS A NEED FOR MORE ATTENTION QUA THE CONDITIONS PRESCRIBED IN CLAUSES (A) TO (D) OF RULE 10B(2) OF THE IT RULES 1962 FOR AN ULTIMATE JUDGMENT ON THE COMPARABILITY OF IMPUGNED TRANSACTIONS. IT SHOULD NOT BE THE CASE THAT A COMPARABLE SHOULD BE EXCLUDED BY THE TPO OR DEMANDED BY THE ASSESSEE I F A COMPARABLE IS A LOSS MAKING ONE. SIMILARLY A CASE SHOULD NOT BE INCLUDED ON THE SAME PRINCIPLE. THE JUDGMENT ON THE INCLUSION OR EXCLUSION DEPENDS ON THE DATA AND TH E APPLICABILITY OF THE SPECIFIED CONDITIONS IN THE SAID CLAUSES. WHOEVER DEMANDS FOR OR AGAINST SUCH EXCLUSION OR INCLUSION NEEDS TO DEMONSTRATE WITH FACTS AND REASONS IN SUPPORT OF THE CLAIM. NORMALLY AS PER THE OECD TP GUIDELINES THE LOSSES OR UNUSUA L PROFITS CONSTITUTE EXTREME RESULTS AND SUCH RESULTS DEMANDS FURTHER EXAMINATION INTO THE REASONS FOR SUCH RESULTS. IF SUCH EXAMINATION RESULTS IN DETECTION OF THE RESPONSIBLE REASONS CAUSING SUCH LOSSES THERE IS NEED FOR ADJUSTMENTS TO THE MARGINS OR EXC LUSIONS OF THAT CASE FOR THE PURPOSE OF COMPARABILITY STUDIES. RELIANCE IS PLACED ON THE ORDER OF THE TRIBUNAL IN THE CASE OF WILLIS PROCESSING INDIA P. LTD. 30 TAXMANN.COM 350 MUM AND THE DECISION OF DELHI BENCH IN THE CASE OF SAPIENT CORPORATION PVT. L TD REPORTED IN 46 SOT 60 (DEL) . THEREFORE IN PRINCIPLE WE APPRECIATE THE ARGUMENT PUT FORWARDED BY THE SRI AJEET JAIN LD CIT DR AND IN FAVOUR OF THE REVENUE AND REJECT THE CONCLUSIONS OF THE CIT (A) . EX CONSEQUENTI THE CASE OF M/S. GEEFCEE FINANCE LIMITED IS NOT A GOOD COMPARABLE AND THEREFORE WE SET ASIDE THE FINDING OF THE CIT (A) IN THIS REGARD AND DIRECT FOR EXCLUSION OF THIS CASE FROM THE LIST OF COMPARABLES FOR THE PURPOSE OF COMPUTING THE ALP MARGINS. THE SAME IS SUBJECTED TO VERACITY OF THE DATA FURNISHED BY SRI JAIN AND AO NEEDS TO VERIFY BEFORE THE EXCLUSION AFTER GRANTING ADEQUATE OPPORTUNITY TO THE ASSESSEE. B. JUSTIFICATION FOR EXCLUSION OF (I) A.K. CAPITAL SERVICES LTD; (II) AJCON GLOBAL SERVICES LTD; (III) PIONEER INVESTCORP LTD A ND (VI) BRESCON CORPORATE ADVISORS LTD AS BAD COMPARABLE: 37 . IN CONNECTION WITH THESE 4 COMPARABLES LD DR RELIED ON THE CONCLUSIONS GIVEN BY THE TPO IN THIS REGARD IN FAVOUR OF CONSIDERING THE SAME AS GOOD COMPARABLES. 21 38 . ON THE OTHER HAND LD COUNSEL DEMONSTRATED THAT THESE COMPANIES ARE NOT FUNCTIONALLY COMPARABLE (FAR ANALYSIS) AS THEY ARE NOT ENGAGED IN RENDERING OF THE ADVISORY SERVICES LIKE IN THE CASE OF THE ASSESSEE. REFERRING TO A.K. CAPITA L SERVICES LTD LD COUNSEL MENTIONED THAT THIS COMPANY UNDERTAKES MERCHANT BANKING ACTIVITIES WHICH ARE REGULATED BY THE SEBI. REFERRING TO AJCON GLOBAL SERVICES LTD LD COUNSEL MENTIONED THAT THIS COMPANY IS ENGAGED IN THE EQUITY BROKING AND FINANCIAL AD VISORY SERVICES WHICH IS FUNCTIONALLY DIFFERENT AND NOT COMPARABLE TO THE ACTIVITIES OF THE ASSESSEE. REFERRING TO PIONEER INVESTCORP INC LD COUNSEL MENTIONED THAT THIS COMPANY IS PREDOMINANTLY ENGAGED IN THE FIELD OF DEBT SYNDICATION AND ALLIED SERVICES TO THE CORPORATE SECTOR AND ALSO IN THE BUSINESS OF TRADING IN GOVERNMENT SECURITIES. REFERRING TO THE BRESCON CORPORATE ADVISORS LTD LD COUNSEL ARGUED VEHEMENTLY STATING THAT ITS FUNCTIONS ARE ENTIRELY DIFFERENT (IE DEBT SYNDICATION FINANCIAL RESTRUCTU RING CAPITAL MARKET SERVICES ETC). THIS COMPANY WAS NOT CONSIDERED A GOOD COMPARABLE IN THE ASSESSEES OWN CASE VIDE THE CONTENTS OF THE PARAGRAPH 53 OF THE ORDER OF THE ITAT FOR THE AY 2007 - 08 AND 2008 - 09. THE NAME OF THE COMPANY WAS WRONGLY SPELT AS BRE SCON CORPORATE FINANCE LTD (SIC). HOWEVER IT WAS CORRECTLY TYPED IN THE TABLE ABOVE PARA 46 OF THE ORDER OF THE ITAT DT. 30.08.2013. TO SUPPORT THE SAME AND THE ORDER/CONCLUSIONS OF THE CIT(A) LD COUNSEL FOR THE ASSESSEE BROUGHT OUT ATTENTION TO THE FINA NCIALS AND THE SEGMENTAL DETAILS BASED ON THE DOCUMENTS FURNISHED BEFORE AND SUBMITTED FOR NOT DISTURBING THE FINDING OF CIT(A) GIVEN IN PARA 12.5 AND 12.6OF THE IMPUGNED ORDER. 39 . WE HAVE HEARD THE PARTIES AND PERUSED THE ORDERS OF THE REVENUE AND THE DOCUMENTS PLACED BEFORE US. INITIAL LINES OF THE SAID PARA 12.6 IS RELEVANT AND THE SAME READ AS UNDER: 12.6 I HAVE CONSIDERED THE OBSERVATIONS OF THE TPO/AO IN RESPECT OF THE SIX COMPARABLES . I AGREE WITH THE ARGUMENTS OF THE APPELLANT THAT OF (I) A.K. CAPITAL SERVICES LTD; (II) AJCON GLOBAL SERVICES LTD; (III) PIONEER INVESTCORP LTD AND (VI) BRESCON CORPORATE ADVISORS LTD ARE NOT COMPARABLE TO THE APPELLANT BECAUSE THEIR MAJOR ACTIVITY IS IN FIELDS OTHER THAN FINANCIAL ADVISORY SERVICES NO INCRIMINA TING DOCUMENT ON DATA IN RESPECT OF THESE FOUR COMPANIES IS BROUGHT BY LD DR TO OUR NOTICE TO CONTROVERT THE ABOVE FINDING OF THE CIT(A). CONSIDERING THE SAME WE ARE OF THE OPINION THE FINDING OF THE CIT(A) ON THIS ISSUE DO NOT CALL FOR 22 ANY INTERFERENCE. ACCORDINGLY WE DISMISS THIS PART OF THE GROUND OF THE APPEAL FO THE REVENUE. 40 . FINALLY WE DIRECT THE AO/TPO TO CONSIDER OUR FINDING ABOVE AND WORK OUT THE OPERATING MARGIN IN RELATION TO THE TOTAL COST THE PLI THE CRITERION ACCEPTE D BY THE ASSESSEE AND APPLY THE PROVISIONS OF THE PROVISO TO SECTION 92C(2) OF THE ACT IN ACCORDANCE WITH THE LAW ONLY IN CASE THE FINAL ASSESSEES MARGIN IS NOT AT ARMS LENGTH. THEY SHALL GRANT REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE IN AC CORDANCE WITH THE SET PRINCIPLES OF NATURAL JUSTICE. 4 1 . IN THE RESULT BOTH THE CROSS APPEALS ARE PARTLY ALLOWED. ORDER IS PRONO UNCED IN THE OPEN COURT ON 30 TH OCTOBER 2013. SD/ - SD/ - (B.R. MITTAL) (D . KARUNAKARA RAO) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI ; DATED 30. 10.2013 . . ./ OKK SR. PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 4. / CIT 5. / DR ITAT MUMBAI 6. / GUARD FILE . //TRUE COPY// / BY ORDER / (DY./ASSTT. REGISTRAR) / ITAT MUMBAI